Alcatel-Lucent Retirement Income Plan Service Based Program Summary Plan Description March 31, 2011

Transcription

1 Alcatel-Lucent Retirement Income Plan Service Based Program Summary Plan Description March 31, 2011

2 Alcatel-Lucent Retirement Income Plan - Service Based Program Disclaimer This is a summary of the benefits available to eligible management employees under the Service Based Program (SBP) provisions of the Alcatel-Lucent Retirement Income Plan (Pension Plan). This SPD applies only to participants in the Service Based Program who retire, die, or terminate employment on or after March 31, Benefits for participants who retired, died or terminated employment prior to March 31, 2011 are governed by the terms of the Pension Plan in effect as of the date of their termination of employment, unless a later amendment specifically grants benefits to them. This summary is provided for informational purposes only and is intended to comply with Department of Labor requirements for Summary Plan Descriptions ( SPDs ). More detailed information about the Plan is provided in the official Pension Plan document, a copy of which can be obtained by writing to the Pension Plan Administrator (see Important Contacts and Other Important Information ). This summary is based on Pension Plan provisions in effect on March 31, 2011 and replaces all previous SPDs and other descriptions of benefits provided under the Pension Plan. If there is any conflict between the information in this SPD and the Pension Plan document, the Pension Plan document will govern. PENSION PLAN MAY BE AMENDED OR TERMINATED The Company expects to continue the Pension Plan but reserves the right to amend or terminate the Pension Plan, in whole or in part, at any time by the resolution of the Board of Directors or its properly authorized designee. Questions regarding your benefits should be addressed as indicated in this SPD (see Important Contacts ). Because of the many detailed provisions of the Pension Plan, no one other than the personnel or entities identified in this SPD (see Important Contacts ) is authorized to advise you as to your benefits. Neither the Company nor the Pension Plan can be bound by statements made by unauthorized personnel or entities. In the event of a conflict between any verbal information provided to you by an authorized resource and information in the official Pension Plan document, the Pension Plan document will govern.

3 Alcatel-Lucent Retirement Income Plan - Service Based Program Alcatel-Lucent Retirement Income Plan Service Based Program DISCLAIMER... INSIDE FRONT COVER INTRODUCTION... 1 THE PENSION PLAN HIGHLIGHTS... 2 PARTICIPATING IN THE PENSION PLAN... 4 WHEN PARTICIPATION BEGINS...4 COST...4 ELIGIBILITY FOR PENSION BENEFITS... 5 SERVICE PENSION...5 Early Commencement Discount Rules for Service Pensions...5 TRANSITION PENSION...6 Early Commencement Discount Rules for Transition Pensions...7 DISABILITY PENSION...7 DEFERRED VESTED PENSION...8 PENSION BENEFITS PAYABLE FOLLOWING YOUR DEATH... 9 IF YOU DIE WHILE ACTIVELY EMPLOYED...9 IF YOU DIE AFTER LEAVING THE COMPANY BUT BEFORE BEGINNING YOUR SERVICE PENSION, TRANSITION PENSION OR DISABILITY PENSION IF YOU DIE AFTER LEAVING THE COMPANY BUT BEFORE BEGINNING YOUR DEFERRED VESTED PENSION IF YOU DIE AFTER YOUR SERVICE PENSION, TRANSITION PENSION, OR DISABILITY PENSION STARTS IF YOU DIE AFTER YOUR DEFERRED VESTED PENSION STARTS HOW PENSION BENEFITS ARE PAID...14 SERVICE PENSION/TRANSITION PENSION/DISABILITY PENSION DEFERRED VESTED PENSION IF YOU DEFER PAYMENT OF YOUR PENSION...19 PAYMENT METHODS FOR PENSION BENEFITS...20 SERVICE PENSION/TRANSITION PENSION/DISABILITY PENSION DEFERRED VESTED PENSION CALCULATING YOUR PENSION PLAN BENEFIT...25 SERVICE PENSION FORMULA Pension Calculation Example Using the Current Service Pension Formula TRANSITION PENSION FORMULA Pension Calculation Example Using the Transition Pension Formula DISABILITY PENSION CALCULATION Termination of Disability Pension Benefits DEFERRED VESTED PENSION CALCULATION FACTORS AFFECTING BENEFIT CALCULATION This SPD describes the Service Based Program provisions of the Alcatel-Lucent Retirement Income Plan as of March 31, More detailed information is provided in the official Pension Plan

4 Alcatel-Lucent Retirement Income Plan - Service Based Program If You Have an Absence Part-time Employment EARLY COMMENCEMENT DISCOUNT EXAMPLES HOW SURVIVOR ANNUITIES ARE CALCULATED FOR SERVICE PENSIONS, TRANSITION PENSIONS, DISABILITY PENSIONS AND DEFERRED VESTED PENSIONS Service/Transition/Disability Pension Example: Joint and 50% Survivor Annuity Service/Transition/Disability Pension Example: Joint and 75% Survivor Annuity Service/Transition/Disability Pension Example: Joint and 100% Survivor Annuity Service/Transition/Disability Pension Example: 10-Year Certain Annuity Deferred Vested Pension Example: Joint and 50% Survivor Annuity Deferred Vested Pension Example: Joint and 75% Survivor Annuity EMPLOYMENT RELATED EVENTS...41 IF YOU ARE ABSENT DUE TO A DISABILITY UNDER THE ALCATEL-LUCENT SHORT TERM DISABILITY (STD) PLAN IF YOU TAKE A LEAVE OF ABSENCE IF YOU TERMINATE YOUR EMPLOYMENT If You Terminate Employment Due to a Permanent Disability IF YOU LEAVE THE COMPANY AND ARE REHIRED If You Are Rehired After You Commence Your Pension Benefit If You Are Rehired After Receiving a Lump Sum Payment IF YOU TRANSFER IF YOU TRANSFER FROM THE SERVICE BASED PROGRAM OF THE PENSION PLAN TO OR FROM A POSITION COVERED BY THE LUCENT TECHNOLOGIES INC. RETIREMENT PLAN IF YOU WORK BEYOND AGE 70½ If You Attain Age 70½ On or After January 1, If You Attained Age 70½ Before January 1, TERMS YOU SHOULD KNOW...47 IMPORTANT CONTACTS...63 PENSION SERVICE CENTER (PSC) By Phone Online By Mail OTHER RESOURCES OTHER IMPORTANT INFORMATION...66 CLAIM PROCEDURES APPEAL PROCEDURES RIGHTS OF A PLAN PARTICIPANT OR BENEFICIARY UNDER ERISA PRUDENT ACTIONS BY PLAN FIDUCIARIES ENFORCE YOUR RIGHTS ASSISTANCE WITH YOUR QUESTIONS FAMILY AND MEDICAL LEAVE ACT OF PENSION PLAN DOCUMENTS PLAN TERMINATION NON-ASSIGNMENT OF BENEFITS TOP HEAVY RULES MAXIMUM BENEFIT LIMITATIONS PENSION BENEFIT GUARANTY CORPORATION PAYMENTS UNDER LAW This SPD describes the Service Based Program provisions of the Alcatel-Lucent Retirement Income Plan as of March 31, More detailed information is provided in the official Pension Plan

5 Alcatel-Lucent Retirement Income Plan - Service Based Program UNCLAIMED BENEFITS PENSION PLAN ADMINISTRATOR PENSION PLAN IDENTIFICATION APPENDICES...79 APPENDIX A: SURVIVOR ANNUITY REDUCTION FACTORS FOR SERVICE, TRANSITION, DISABILITY, AND DEFERRED VESTED PENSIONS APPENDIX B: TRANSITION LEAVE OF ABSENCE APPENDIX C: FORMER AFFILIATES APPENDIX D: SPECIAL RULES AND AGREEMENTS AND YOUR PENSION If You Had Bell System Service Before January 1, Summary of the Mandatory Portability Agreement (MPA) Service Recognition under Certain Corporate Transactions Summary of Rules Applicable to Former Employees of AG Communication Systems This SPD describes the Service Based Program provisions of the Alcatel-Lucent Retirement Income Plan as of March 31, More detailed information is provided in the official Pension Plan

6 Introduction INTRODUCTION Here is your summary of the key features of the Service Based Program of the Alcatel-Lucent Retirement Income Plan (Pension Plan). Certain words and phrases have a specific meaning under the Service Based Program of the Pension Plan. These terms are capitalized whenever they appear to let you know that they are defined in the Section labeled Terms You Should Know. Effective December 31, 2009, benefit accruals under the Pension Plan ceased. Compensation paid after December 31, 2009 will not be taken into account for purposes of determining benefits under the Pension Plan. The Pension Plan is an important part of your financial security. It can provide a source of continuing income during your retirement years, and it may provide survivor benefits to your eligible Lawful Spouse or other named beneficiary in certain specified instances. The Pension Plan is provided at no cost to you. Page 1

7 The Pension Plan - Highlights THE PENSION PLAN HIGHLIGHTS Here is a summary of the key features of the Service Based Program of the Pension Plan. Service Based Program Feature Eligibility Cost Vesting Service Based Program Benefits Summary Generally, you must have been first hired by a Participating Company prior to January 1, 1999 to be covered under the Service Based Program of the Pension Plan. Alcatel-Lucent USA Inc. pays the entire cost of the Pension Plan. There is no cost to you. Vesting refers to earning a nonforfeitable right to your Pension Plan benefit. Generally, you are Vested after you complete three years of Vesting Service. Any Participant who was employed by the Company or an Affiliate on December 31, 2009 shall be fully Vested. The Service Based Program of the Pension Plan provides four kinds of pensions to Participants: A Service Pension if you retire after attaining age 50 and completing at least 15 years of Net Credited Service (NCS) A Transition Pension if you were a Participant prior to January 1, 1998 and meet the Transition Pension Eligibility Rules A Disability Pension if you are unable to work due to disability and have completed at least 15 years of NCS A Deferred Vested Pension, if you leave the Company after you become Vested and you are not eligible to receive a Service Pension, Transition Pension or Disability Pension. Effective December 31, 2009, benefit accruals under the Pension Plan ceased. Compensation paid after December 31, 2009 will not be taken into account for purposes of determining benefits under the Pension Plan. Page 2

8 The Pension Plan - Highlights Service Based Program Feature Information About Your Pension Plan Summary Call the Pension Service Center (PSC) at for information about the Service Based Program and to initiate payment of your pension benefits. You can also reach the PSC by regular mail as follows: Alcatel-Lucent Pension Service Center P.O. Box Jacksonville, FL You can access the Alcatel-Lucent Pension Service Center website at Page 3

9 Participating in the Pension Plan PARTICIPATING IN THE PENSION PLAN WHEN PARTICIPATION BEGINS Generally, an individual must have been first hired by a Participating Company prior to January 1, 1999 and be classified as a salaried management employee (an employee paid at a monthly or annual rate whose position is not subject to automatic wage progression) to be a Participant in the Service Based Program of the Pension Plan. Special rules apply to individuals who have not continuously participated in the Service Based Program since January 1, 1999 (e.g., leaves of absence, rehires, transfers, eligible for Mandatory Portability Agreement, etc.). Because each individual s facts and circumstances are unique, the service history must be reviewed to determine status as a Participant in the Service Based Program. Please contact the Pension Service Center (see Important Contacts ) with questions regarding Participant status in the Service Based Program. COST Alcatel-Lucent USA Inc. pays the full cost of providing your pension. There is no cost to you. Page 4

10 Eligibility for Pension Benefits ELIGIBILITY FOR PENSION BENEFITS The Pension Plan is designed to help build your future financial security. The Service Based Program of the Pension Plan provides four kinds of pensions: A Service Pension, A Transition Pension, A Disability Pension, or A Deferred Vested Pension This section describes the types of pension you might receive depending on how and when you terminate employment with the Company. The type of pension for which you qualify will determine the amount of any reduction in your pension payments if you commence your pension benefit early. SERVICE PENSION You may retire with a Service Pension at any time if you are at least age 50 with at least 15 years of NCS. Early Commencement Discount Rules for Service Pensions Service Pension Determined Under Service Pension Formula If you retire with a Service Pension and the sum of your completed years and months of age as of your Benefit Commencement Date and your NCS as of your termination date equals at least 75 years, there is no reduction in your pension benefit for early commencement. Page 5

11 Eligibility for Pension Benefits If you retire with a Service Pension and the sum of your completed years and months of age as of your Benefit Commencement Date and NCS as of your termination date is fewer than 75 years, an early commencement discount will apply. The discount for early commencement equals ¼% a month for each month or partial month (3% for each year) that the sum of your age and Service is fewer than 75 years. Service Pension Determined Under Transition Pension Formula If you are retiring with a Service Pension but the highest pension amount payable to you is determined under a Transition Pension Formula, your pension amount will be reduced for commencement before age 55 using the Transition Pension Early Commencement Discount rules. If your Benefit Commencement Date is before you attain age 55, your pension will be reduced for early commencement as follows: If you have fewer than 30 years of NCS, your pension benefit will be reduced by ½% a month for each month and partial month (6% for each year) that payments start before age 55. If you have 30 or more years of NCS, your pension benefit will be reduced by ¼% a month for each month and partial month (3% for each year) that payments start before age 55. If your Benefit Commencement Date is on or after the date you reach age 55, there is no reduction in the amount of your pension. TRANSITION PENSION If you do not meet the Service Pension Eligibility Rule and you became a Participant prior to January 1, 1998, you are eligible to retire with an immediately payable Transition Pension benefit if you meet the following rules: Your age is at least And Your NCS is at least Any age 30 years years years years Page 6

12 Eligibility for Pension Benefits Early Commencement Discount Rules for Transition Pensions If your Benefit Commencement Date is on or after the date you reach age 55, there is no early commencement reduction in the amount of your Transition Pension. If your Benefit Commencement Date is prior to the date you reach age 55, your Transition Pension will be reduced for early commencement as follows: If you have fewer than 30 years of NCS, your Transition Pension benefit will be reduced by ½% a month for each month and partial month (6% for each year) that payments start before age 55. If you have 30 or more years of NCS, your Transition Pension benefit will be reduced by ¼% a month for each month and partial month (3% for each year) that payments start before age 55. DISABILITY PENSION You are eligible to retire with a Disability Pension if: You have completed at least 15 years of Net Credited Service, and You are Totally Disabled due to an illness or an injury (you are considered Totally Disabled if the Pension Plan determines that your disability prevents you from returning to work for the Company), and You are terminated from the payroll due to your continued Total Disability after the expiration of 26 weeks of disability benefits under the Alcatel- Lucent Short Term Disability Plan. If you meet these requirements and are also eligible for a Service Pension, you will receive a Service Pension Due to Disability and not a Disability Pension. There is no early commencement discount for a Disability Pension or a Service Pension Due to Disability. If you are eligible for workers compensation benefits or other payments under a similar law, the amount of the benefit you receive as a Disability Pension under the Pension Plan will be reduced by the amount of the benefit you receive from those other sources for the same disability. This reduction does not apply to a Service Pension Due to Disability. Page 7

13 Eligibility for Pension Benefits You are not eligible to receive a Disability Pension while receiving sickness disability benefits under the Alcatel-Lucent Short Term Disability Plan. You are also not eligible to receive a Disability Pension while receiving accident disability benefits under the Alcatel-Lucent Sickness and Accident Disability Benefit Plan (previously known as the Lucent Technologies Inc. Sickness and Accident Disability Benefits Plan) for a job-related injury that occurred prior to January 1, DEFERRED VESTED PENSION You are eligible for a Deferred Vested Pension if you leave the Company after becoming Vested, provided you are not eligible for a Service Pension, Transition Pension or Disability Pension. You may receive your Deferred Vested Pension starting at age 65, in which case, no reduction will be made to your pension because of your age at the time payments start. You may receive your Deferred Vested Pension payments at any time before age 65, but your benefit will be reduced by an actuarial factor that takes into account your age when your payments start. For the percentage of your age-65 pension that you will receive if you begin your Deferred Vested Pension before age 65, contact the Pension Service Center (PSC) (see Important Contacts ). Page 8

14 Pension Benefits Payable Following Your Death PENSION BENEFITS PAYABLE FOLLOWING YOUR DEATH IF YOU DIE WHILE ACTIVELY EMPLOYED The Service Based Program of the Pension Plan provides an automatic survivor annuity that pays lifetime income to your eligible Lawful Spouse if you die as an active employee after you become eligible for a Deferred Vested Pension. If you die and have at least 15 years of NCS or are eligible for a Service Pension, your Lawful Spouse will receive 100% (50% for deaths prior to May 1, 2009) of the reduced benefit you would have received payable as a monthly survivor annuity had you retired on the date of your death. There is no discount for early commencement. The annuity for your Lawful Spouse begins as of the day after your death. If you were on the active payroll on March 31, 2011 and die on or after March 31, 2011, your Lawful Spouse will have the choice to receive a Lump Sum payment of the present value of the immediately payable survivor annuity. If you are eligible for a Deferred Vested Pension and you have fewer than 15 years of NCS at the time of your death, your Lawful Spouse must have been married to you throughout the one-year period immediately before your death to be eligible for this benefit. If your Lawful Spouse meets the one-year marriage requirement, your Lawful Spouse is entitled to a 50% survivor annuity. The survivor annuity equals 50% of the pension benefit that you would have received at age 65 (or date of death, if date of death is after age 65) reduced for the cost of survivor annuity coverage. Your Lawful Spouse has a choice of the following payment options: A Lump Sum payment of the present value of the survivor annuity benefit that would have been payable at your age 65 (or your date of death, if date of death is after age 65), or An immediately payable monthly survivor annuity benefit reduced for each year it starts before you would have reached age 65 as well as for the cost of the survivor annuity coverage, or Page 9

15 Pension Benefits Payable Following Your Death Deferred commencement of the survivor annuity. Your Lawful Spouse may begin the survivor annuity any time before the date you would have reached age 65. The survivor annuity will be reduced for each year it starts before such date as well as for the cost of the survivor annuity coverage. No benefit will be paid under the Service Based Program of the Pension Plan if you are not Vested when you die and/or have no Lawful Spouse. IF YOU DIE AFTER LEAVING THE COMPANY BUT BEFORE BEGINNING YOUR SERVICE PENSION, TRANSITION PENSION OR DISABILITY PENSION If you are entitled to a Service Pension, Transition Pension or Disability Pension when you leave the Company and die before your pension begins, your Lawful Spouse is covered by a Preretirement Survivor Annuity. To qualify for this annuity, your Lawful Spouse must be legally married to you on your date of death. Your eligible Lawful Spouse will receive 50% of the benefit you would have received under the Joint and 50% Survivor Annuity payment method had you begun your pension on the day you died. The benefit amount your Lawful Spouse receives is subject to an early commencement discount based on your age when you die, your NCS on your last day on the active payroll and whether your highest pension benefit is calculated under the Service Pension Formula or the Transition Pension Formula, which determines which early retirement reductions apply. If you were on the active payroll on March 31, 2011 and die on or after April 1, 2011, and if no survivor benefit payments have been made, your Lawful Spouse will have the option to receive a Lump Sum payment of the present value of the immediately payable survivor annuity. Special rules may apply if you die during the 90-day election period without making a pension election, or if you elect a Joint and Survivor Annuity option or Lump Sum option and die prior to your Benefit Commencement Date. No benefits will be paid under the Service Based Program of the Pension Plan if you are not legally married at the time of your death. Page 10

16 Pension Benefits Payable Following Your Death IF YOU DIE AFTER LEAVING THE COMPANY BUT BEFORE BEGINNING YOUR DEFERRED VESTED PENSION If you are entitled to a Deferred Vested Pension when you leave the Company and die before your pension begins, your eligible Lawful Spouse is covered by a Preretirement Survivor Annuity. Your Lawful Spouse can commence the Preretirement Survivor Annuity at any time after your date of death up until the date you would have reached age 65. To qualify for this annuity, your Lawful Spouse must be legally married to you throughout the one-year period immediately before your death. If your Lawful Spouse meets the one-year marriage requirement, your Lawful Spouse is entitled to a 50% survivor annuity. The survivor annuity equals 50% of the pension benefit that you would have received at age 65 (or date of death, if date of death is after age 65) reduced for the cost of survivor annuity coverage. Your Lawful Spouse has a choice of the following payment options: A Lump Sum payment (the lump sum is only available for participants who terminated employment on or after January 1, 1998) of the present value of the survivor annuity benefit that would have been payable at your age 65 (or your date of death, if date of death is after age 65), or An immediately payable monthly survivor annuity benefit reduced for each year it starts before you would have reached age 65 as well as for the cost of the survivor annuity coverage, or Deferred commencement of the survivor annuity. Your Lawful Spouse may begin the survivor annuity any time before the date you would have reached age 65. The survivor annuity will be reduced for each year it starts before such date as well as for the cost of the survivor annuity coverage. Upon notification of your death, the PSC will send a commencement package to your surviving Lawful Spouse, setting forth the available survivor annuity benefit options, including deferral of the commencement of the survivor benefit to your age 65, if applicable. Special rules may apply if you elect a Joint and Survivor Annuity option or Lump Sum option and die prior to your Benefit Commencement Date. Page 11

17 Pension Benefits Payable Following Your Death IF YOU DIE AFTER YOUR SERVICE PENSION, TRANSITION PENSION, OR DISABILITY PENSION STARTS If you are receiving pension benefits under the Single Life Annuity, payments end on the last calendar day of the month of your death. If you are receiving pension benefits under the Joint and 50% Survivor Annuity, upon your death your eligible Lawful Spouse who was married to you on the date your pension began will receive 50% of the reduced monthly benefit for life. Payments to your eligible Lawful Spouse will begin on the first calendar day of the month immediately following your date of death. If you are receiving pension benefits under the Joint and 75% Survivor Annuity, upon your death your eligible Lawful Spouse who was married to you on the date your pension began will receive 75% of the reduced monthly benefit for life. Payments to your eligible Lawful Spouse will begin on the first calendar day of the month immediately following your date of death. If you are receiving pension benefits under the Joint and 100% Survivor Annuity, upon your death your eligible Lawful Spouse who was married to you on the date your pension began will receive 100% of the reduced monthly benefit for life. Payments to your eligible Lawful Spouse will begin on the first calendar day of the month immediately following your date of death. If you are receiving pension benefits under the 10-Year Certain Annuity, your designated beneficiary or estate will receive any remaining guaranteed payments after your death. Payment will stop after the last guaranteed payment is made. IF YOU DIE AFTER YOUR DEFERRED VESTED PENSION STARTS If you are receiving pension benefits under the Single Life Annuity, payments end on the last calendar day of the month of your death. If you are receiving pension benefits under the Joint and 50% Survivor Annuity, upon your death your eligible Lawful Spouse who was married to you on the date your pension began will receive 50% of the reduced monthly benefit for life. Payments to your eligible Lawful Spouse will begin on the first calendar day of the month immediately following your date of death. Page 12

18 Pension Benefits Payable Following Your Death If you are receiving pension benefits under the Joint and 75% Survivor Annuity, upon your death your eligible Lawful Spouse who was married to you on the date your pension began will receive 75% of the reduced monthly benefit for life. Payments to your eligible Lawful Spouse will begin on the first calendar day of the month immediately following your date of death. Page 13

19 How Pension Benefits Are Paid HOW PENSION BENEFITS ARE PAID How your pension benefit is paid to you depends on the amount of your pension, whether or not you are legally married, and on the payment option you choose. However, if the present value of your Service Pension, Transition Pension, Disability Pension or Deferred Vested Pension is $1,000 or less, then payment of your pension benefit will be made in a Lump Sum. SERVICE PENSION/TRANSITION PENSION/DISABILITY PENSION Prior to beginning your Service Pension, Transition Pension or Disability Pension, you must request a commencement package from the PSC. The package will contain a preliminary pension calculation and information about your pension payment options and costs. If the present value of your Service Pension, Transition Pension or Disability Pension exceeds $1,000 when your employment ends, you may elect to receive your Service Pension, Transition Pension or Disability Pension as an annuity or as a Lump Sum. If the present value of your pension benefit is more than $5,000 when your employment ends, you must have been on the active payroll on March 31, 2011 with a Benefit Commencement Date on or after April 1, 2011 to be eligible for the Lump Sum option. If you elect to receive your Service Pension, Transition Pension or Disability Pension as an annuity, your Service Pension, Transition Pension or Disability Pension will be paid as follows: If you are legally married on your Benefit Commencement Date, the normal form of payment is the Joint and 50% Survivor Annuity. However, you may decline the Joint and 50% Survivor Annuity and instead elect the Joint and 75% Survivor Annuity, the Joint and 100% Survivor Annuity, the Single Life Annuity or the 10-Year Certain Annuity with your Lawful Spouse s written, notarized consent. If you are not legally married on your Benefit Commencement Date, your pension will be paid as a Single Life Annuity, unless you elect the 10-Year Certain Annuity. Page 14 This SPD describes the Service Based Program provisions of the Alcatel-Lucent Retirement Income Plan as of March 31, More detailed information is provided in the official Pension Plan

20 How Pension Benefits Are Paid If you elect to receive your Service Pension, Transition Pension or Disability Pension as a Lump Sum, with the written, notarized consent of your Lawful Spouse, you must select one or more of the following four distribution options: A single Lump Sum payment to you, and/or Direct Rollover to a traditional IRA, and/or Direct Rollover to a Roth IRA, and/or Direct Rollover to another employer s qualified retirement plan, including the Alcatel-Lucent Savings Plan (ALSP), if you have an account in that plan. If you receive a Lump Sum Distribution of your Service Pension, Transition Pension or Disability Pension, your rights and entitlements, and those of your Lawful Spouse, if any, under the Pension Plan cease upon payment of a Lump Sum Distribution. For more information about the available payment options, see Payment Methods For Pension Benefits. The payment option elected is effective as of your Benefit Commencement Date. Service Pensions and Transition Pensions normally begin the day after you leave the Company and are paid monthly. You will receive your first pension check on or about the first day of the month that is at least 60 days after your Benefit Commencement Date. Disability Pensions normally begin the day after your 26 weeks of disability benefits expire under the Alcatel-Lucent Short Term Disability Plan. You will receive your first pension check on or about the first day of the month that is at least 60 days after your Benefit Commencement Date. To elect or change an option, you must notify the PSC in writing: Within the 90 days immediately before your pension is to begin, or, if later, Within 90 days immediately after the date the PSC mails or personally delivers to you your pension estimates and survivor annuity costs. Keep in mind that if you are married and you change your mind one or more times during the election period, your Lawful Spouse s written, notarized consent is required each time you decline the Joint and 50% Survivor Annuity. However, once your Lawful Spouse has given consent to any declination you Page 15 This SPD describes the Service Based Program provisions of the Alcatel-Lucent Retirement Income Plan as of March 31, More detailed information is provided in the official Pension Plan

21 How Pension Benefits Are Paid have made, your Lawful Spouse cannot unilaterally withdraw consent for that declination. Once the 90-day election period is over, you cannot change your choice for any reason, including a change in your marital status. If you have received a commencement package and are in the process of electing payment of your pension benefit within the 90-day election period, and your Benefit Commencement Date as shown in the commencement package has passed, then you and your Lawful Spouse, if applicable, will need to consent to a retroactive Benefit Commencement Date. If you select the Joint and 50% Survivor Annuity, the Joint and 75% Survivor Annuity, or the Joint and 100% Survivor Annuity and your Lawful Spouse dies before you, your pension benefit will be increased by the amount of the original reduction. If you commence your pension with a Joint and 50% Survivor Annuity, a Joint and 75% Survivor Annuity, or a Joint and 100% Survivor Annuity, your eligible Lawful Spouse to whom you are legally married on the day your pension begins remains entitled to the annuity if you are later separated or divorced, even if one or both of you remarry. If you decline the Joint and 50% Survivor Annuity and elect the Single Life Annuity with your Lawful Spouse s written, notarized consent, you will receive your full pension for life. Following your death, all payments will stop. DEFERRED VESTED PENSION Prior to beginning your Deferred Vested Pension, you must request a commencement package from the PSC. You will have a 90-day election period during which you may elect to have your Deferred Vested Pension paid immediately, or to have payment deferred until a later date. If the present value of your Deferred Vested Pension exceeds $1,000 when your employment ends, you will have the following payment options for your Deferred Vested Pension: You may receive your Deferred Vested Pension payable as an annuity starting at age 65 (or when you terminate employment, if you terminate after age 65). In this case, no reduction will be made to your pension because of your age at the time payments start. Page 16 This SPD describes the Service Based Program provisions of the Alcatel-Lucent Retirement Income Plan as of March 31, More detailed information is provided in the official Pension Plan

22 How Pension Benefits Are Paid You may begin receiving your Deferred Vested Pension payable as an annuity at any time before age 65. In this case, your pension will be reduced by an actuarial factor that takes into account your age when payments begin. You may receive your Deferred Vested Pension as a Lump Sum (if you are legally married, you must obtain your Lawful Spouse s written, notarized consent). If you elect to receive your Deferred Vested Pension as a Lump Sum, with the written, notarized consent of your Lawful Spouse, you must select one or more of the following four distribution options: A single Lump Sum payment to you, and/or Direct Rollover to a traditional IRA, and/or Direct Rollover to a Roth IRA, and/or Direct Rollover to another employer s qualified retirement plan, including the Alcatel-Lucent Savings Plan (ALSP), if you have an account in that plan. If you receive a Lump Sum Distribution of your Deferred Vested Pension, your rights and entitlements, and those of your Lawful Spouse, if any, under the Pension Plan cease upon payment of a Lump Sum Distribution. If you elect to receive your Deferred Vested Pension as an annuity, your Deferred Vested Pension will be paid as follows: If you are legally married on your Benefit Commencement Date, your pension will be paid to you as a Joint and 50% Survivor Annuity. However, you may decline the Joint and 50% Survivor Annuity and elect the Single Life Annuity or Joint and 75% Survivor Annuity with the written, notarized consent of your Lawful Spouse. If you are not legally married on your Benefit Commencement Date, your pension will be paid to you as a Single Life Annuity with no payments continuing after your death. If your Deferred Vested Pension is paid as an annuity, you will receive your first check on or about the first day of the month which is at least 60 days after your Benefit Commencement Date. Page 17 This SPD describes the Service Based Program provisions of the Alcatel-Lucent Retirement Income Plan as of March 31, More detailed information is provided in the official Pension Plan

23 How Pension Benefits Are Paid If your Deferred Vested Pension is payable as a Joint and 50% Survivor Annuity or as a Joint and 75% Survivor Annuity and your Lawful Spouse dies before you, but after your pension begins, your pension benefit will be increased by the amount of the original reduction. No payments will be made after your death. If you are legally married, you may decline or re-elect the Joint and 50% Survivor Annuity by notifying the PSC in writing: Within 90 days immediately before your Deferred Vested Pension is to begin, or, if later, Within 90 days immediately after the date the PSC mails or personally delivers to you your pension estimates and survivor annuity costs. If you change your mind one or more times during the election period, your Lawful Spouse s written, notarized consent is required each time you decline the Joint and 50% Survivor Annuity. However, once your Lawful Spouse has given consent to any declination you have made, your Lawful Spouse cannot unilaterally withdraw consent for that declination. Once the 90-day election period is over, you cannot change your choice for any reason, including a change in your marital status. If you have received a commencement package and are in the process of electing payment of your benefit within the 90-day election period, and your Benefit Commencement Date as shown in the commencement package has passed, then you and your Lawful Spouse, if applicable, will need to consent to a retroactive Benefit Commencement Date. If you commence your Deferred Vested Pension with a Joint and 50% Survivor Annuity or a Joint and 75% Survivor Annuity, your eligible Lawful Spouse to whom you are legally married on the day your pension begins remains entitled to the annuity if you are later separated or divorced, even if one or both of you remarry. If you decline the Joint and 50% Survivor Annuity and elect a Single Life Annuity with your Lawful Spouse s written, notarized consent, you will receive your full pension for life. Following your death, all payments will stop. Page 18 This SPD describes the Service Based Program provisions of the Alcatel-Lucent Retirement Income Plan as of March 31, More detailed information is provided in the official Pension Plan

24 If You Defer Payment Of Your Pension IF YOU DEFER PAYMENT OF YOUR PENSION If you elect to defer payment of your pension to a later date, your Lawful Spouse will be covered by a Preretirement Survivor Annuity. If you defer payment of your pension to a later date, you may elect to commence your pension in the future by contacting the PSC in writing. The PSC will send you the appropriate information, along with the forms to be completed and returned before your pension can commence. If you elect to defer payment of your pension and do not contact the PSC to commence your pension, the PSC will contact you approximately three months before your 65th birthday. It is important that you notify the PSC of any change in your address after you leave the active payroll. Page 19

25 Payment Methods for Pension Benefits PAYMENT METHODS FOR PENSION BENEFITS SERVICE PENSION/TRANSITION PENSION/DISABILITY PENSION There are a total of seven payment methods available for a Service Pension, a Transition Pension and a Disability Pension. They include: Automatic Lump Sum. If the present value of your pension benefit is $1,000 or less when your employment ends, your benefit is automatically paid to you as a Lump Sum - you will have no choice concerning the payment of this benefit. If you receive a Lump Sum Distribution of your pension benefit, neither you nor your Lawful Spouse will have any further rights to benefits under the Pension Plan. Lump Sum. If the present value of your pension benefit is more than $1,000 when your employment ends, you have the option of taking your pension immediately as a Lump Sum. If the present value of your pension benefit is more than $5,000 when your employment ends, you must have been on the active payroll on March 31, 2011 with a Benefit Commencement Date on or after April 1, 2011 to be eligible for the lump sum option. If legally married, you must first obtain your Lawful Spouse s written, notarized consent to select this option. If you are eligible for a Service Pension (including a Service Pension Due to Disability) or a Transition Pension, the Lump Sum will equal the present value of the Immediately Payable Benefit, or the present value of the unreduced pension benefit payable at age 65 (if you are under age 65), if greater. If you are eligible for a Disability Pension the Lump Sum will equal the present value of the unreduced pension benefit payable at age 65 or at Benefit Commencement Date if over age 65. If you elect a Lump Sum Distribution of your pension benefit, neither you nor your Lawful Spouse will have any further rights to benefits under the Pension Plan. However, see If You Are Rehired After Receiving a Lump Sum Payment for exceptions if you return to the Company and repay your Lump Sum. Page 20

26 Payment Methods for Pension Benefits Single Life Annuity. This is the automatic payment method if you are not legally married when your pension payments begin. It is also available as an option if you are legally married (provided you obtain the written, notarized consent of your Lawful Spouse). Under this option, monthly payments are made to you for life with no payments continuing upon your death. This payment method produces the greatest monthly benefit of any payment method because only one lifetime is covered. Joint and 50% Survivor Annuity. This is the automatic payment method if you are legally married when your pension payments begin. It provides you with monthly payments for life. These payments are reduced by a percentage based on your age and your Lawful Spouse s age when your pension begins. Upon your death, your Lawful Spouse will receive one half (50%) of the reduced monthly payments for life. If you elect this option and your Lawful Spouse dies before you, but after your pension has begun, your payments will be increased by the amount of the original reduction. Payments are reduced under this payment method to cover two lifetimes yours and your Lawful Spouse s. If you are legally married, you must obtain your Lawful Spouse s written, notarized consent to elect any other payment method. Joint and 75% Survivor Annuity. This payment method is an option if you are legally married when your pension payments begin (provided you obtain the written, notarized consent of your Lawful Spouse). It provides you with monthly payments for life, reduced by a percentage based on your age and your Lawful Spouse s age when your pension begins. Upon your death, your Lawful Spouse will receive 75% of the reduced monthly payments for life. If you elect this option and your Lawful Spouse dies before you, but after your pension has begun, your payments will be increased by the amount of the original reduction. Payments are reduced under this payment method to cover two lifetimes yours and your Lawful Spouse s. The reduction under this method is greater than the reduction under a Joint and 50% Survivor Annuity because this method provides a greater survivor benefit for your Lawful Spouse. Joint and 100% Survivor Annuity. This payment method is an option if you are legally married when your pension payments begin (provided you obtain the written, notarized consent of your Lawful Spouse). It provides you with Page 21

27 Payment Methods for Pension Benefits monthly payments for life, reduced by a percentage based on your age and your Lawful Spouse s age when your pension begins. Upon your death, your Lawful Spouse will receive 100% of the reduced monthly payments for life. If you elect this option and your Lawful Spouse dies before you, but after your pension has begun, your payments will be increased by the amount of the original reduction. Payments are reduced under this payment method to cover two lifetimes yours and your Lawful Spouse s. The reduction under this method is greater than the reduction under a Joint and 50% Survivor Annuity because this method provides a greater survivor benefit for your Lawful Spouse. 10-Year Certain Annuity. This option is available to you, regardless of your marital status when pension payments begin (if legally married, you must obtain the written, notarized consent of your Lawful Spouse). Payments under this option are guaranteed for at least 10 years. This option provides you with monthly payments for life. These payments are reduced by a percentage based on your age when your pension begins. If you die before all guaranteed payments are made, your designated beneficiary or estate will receive the remaining guaranteed payments. Payments to your designated beneficiary or estate will stop after the last guaranteed payment is made. If you live longer than 10 years, the reduced payments will continue for the rest of your life and stop upon your death. If you elect a 10-Year Certain Annuity, you may name as your beneficiary: One or more individuals, A trust, or An estate. If you are receiving your pension as a 10-Year Certain Annuity and your beneficiary dies during the 10-year certain period, you may name a new beneficiary. If you do not name a beneficiary, or if none of your designated beneficiaries is living when you die, the remaining payments under the 10-year certain period will be paid to your estate. Page 22

28 Payment Methods for Pension Benefits DEFERRED VESTED PENSION There are five payment methods for a Deferred Vested Pension. They include: Automatic Lump Sum: If the present value of your Deferred Vested Pension is $1,000 or less when your employment ends, it will automatically be paid to you as a Lump Sum you will have no choice concerning the payment of your Vested benefit. If you receive a Lump Sum Distribution of your Deferred Vested Pension, neither you nor your Lawful Spouse will have any further rights to benefits under the Pension Plan. Lump Sum: If the present value of your Deferred Vested Pension exceeds $1,000 when your employment ends, you have the option of taking your Deferred Vested Pension as a Lump Sum. If legally married, you must first obtain your Lawful Spouse s written, notarized consent to select this option. The Lump Sum will equal the present value of the unreduced pension benefit payable at age 65, or at Benefit Commencement Date if over age 65. If you elect a Lump Sum Distribution of your Deferred Vested Pension, neither you nor your Lawful Spouse will have any further rights to benefits under the Pension Plan. Single Life Annuity. This is the automatic payment method for employees who are not legally married when their Deferred Vested Pension begins. It is also available as an option if you are legally married (provided you obtain the written, notarized consent of your Lawful Spouse). Under this option, monthly payments are made to you for life with no payments continuing upon your death. This payment method produces the greatest monthly benefit of any payment method because only one lifetime is covered. Joint and 50% Survivor Annuity. This is the automatic payment method if you are legally married when your Deferred Vested Pension begins. It provides you with monthly payments for life. These payments are reduced by a percentage based on your age and your Lawful Spouse s age when your pension begins. Upon your death, your Lawful Spouse will receive one half (50%) of the reduced monthly payments for life. If you elect this option and your Lawful Spouse dies before you, but after your pension has begun, your payments will be increased by the amount of the original reduction. Payments are reduced under this payment method to cover two lifetimes yours and your Lawful Spouse s. Page 23

29 Payment Methods for Pension Benefits If you are legally married, you must obtain your Lawful Spouse s written, notarized consent to elect any other payment method. Joint and 75% Survivor Annuity. This payment method is an option if you are legally married when your pension payments begin (provided you obtain the written, notarized consent of your Lawful Spouse). It provides you with monthly payments for life, reduced by a percentage based on your age and your Lawful Spouse s age when your pension begins. Upon your death, your Lawful Spouse will receive 75% of the reduced monthly payments for life. If you elect this option and your Lawful Spouse dies before you, but after your pension has begun, your payments will be increased by the amount of the original reduction. Payments are reduced under this payment method to cover two lifetimes yours and your Lawful Spouse s. The reduction under this method is greater than the reduction under a Joint and 50% Survivor Annuity because this method provides a greater survivor benefit for your Lawful Spouse. Page 24

30 Calculating Your Pension Plan Benefit CALCULATING YOUR PENSION PLAN BENEFIT Your pension benefit under the Service Based Program of the Pension Plan is calculated using a formula that takes into account the following: Your Net Credited Service, Your Pension Includable Compensation *, and The Pay Base Averaging Period. See Terms You Should Know for an explanation of these terms. All pensions including Service Pensions, Transition Pensions, Disability Pensions and Deferred Vested Pensions are determined using the same basic calculation formula. However, certain factors may affect your benefit calculation (see Factors Affecting Benefit Calculation ). This section provides an example of the formula currently used for employees who retire or terminate employment on or after January 1, * Effective December 31, 2009, benefit accruals under the Pension Plan ceased. Compensation paid after December 31, 2009 will not be taken into account for purposes of determining benefits under the Pension Plan. Page 25

31 Calculating Your Pension Plan Benefit SERVICE PENSION FORMULA If you meet the Service Pension Eligibility Rule (attainment of age 50 with 15 years of NCS), your pension benefit is calculated using the Service Pension Formula which applies the January 1, 1994 through December 31, 1998 Pay Base Averaging Period and the current formula described below. Your pension benefit will also be calculated using the January 1, 1993 through December 31, 1997 Pay Base Averaging Period and the frozen formula. The largest pension amount determined using the current and the frozen formula is then reduced in accordance with the Service Pension Early Commencement Discount, if applicable. If you were a Participant in the Pension Plan prior to January 1, 1998, this amount is then compared to the highest amount computed under the Transition Pension Formula using the Transition Pension Early Commencement Discount, if applicable. The highest pension amount, as reduced for early commencement, is then treated as your Service Pension. Your total Pension Includable Compensation for the Pay Base Averaging Period (January 1, December 31, 1998)* Years in averaging period (5 years) X Net Credited Service as of the end of the Pay Base Averaging Period (December 31, 1998) X Benefit multiplier 1.4% (.014) PLUS Total Pension Includable Compensation for Net Credited Service after December 31, 1998 through December 31, 2009* X Benefit multiplier 1.4% (.014) *Note: Compensation paid after December 31, 2009 will not be taken into account for purposes of determining benefits under the Pension Plan. Also, any lump sum merit payments and team management incentive compensation plan awards you received that were paid in December 1997 will count as compensation paid after the Pay Base Averaging Period. This means such payments will not be included for purposes of the Pay Base Averaging Period, but will be included as Pension Includable Compensation paid after December 31, Page 26